Franchise Legal Support For Franchise Buyers ("Franchisees")

A franchisee is an individual who purchases the right to operate a franchised business from a franchisor.  In the franchising world, the term franchisee is also referred to as "zee" while the franchisor is referred to as "zor." 

A "Unit" is an individual franchise territory. A prospective franchise buyer looking to open a single location in a single territory would often purchase a Unit Franchise Offering. The general metrics used to determine the size of the Unit territory are included in the Franchise Disclosure Document (Item 12).  The Unit territories are typically where the franchised business operates.  A Unit territory may be exclusive or may offer limited protection.  

An "Area Representative" is a franchisee who solicits, recruits, and services individual "Unit" franchises within their Area Representative territory. The Area Representative purchases the rights to an area representative territory which includes a certain number of "Unit" territories.  The Area Representative pays a fee for this territory (usually a portion of what  a Unit territory would cost) and in exchange the Area Representative is paid a percentage of the fees and royalties derived from Unit franchises within this territory.

We recommending that individuals conduct due diligence on the brand to ensure that joining the franchiser is a smart business decision. Trust but verify. Start with the Franchise Disclosure Document. You can also conduct online searches and speak to existing and terminated franchisees. We can help you locate these FDD's. 

The offer and sale of franchises is regulated in certain states. A franchisor has to submit an annual registration or filling in certain states. The franchisor cannot offer or sale in your state until a registration or filing is effective in your state. 

That depends. Franchised businesses are offered in nearly every industry and individual franchisors offer various levels of support and control. You want to be the right person joining the right opportunity at the right time.   

Understanding the franchise system is a necessary part of conducting due diligence and making a purchasing decision. The FDD defines the system, the costs of operating the business, explains franchisors (often limited) obligations, and explains a franchisee’s rights and obligations in operating a franchised business. The FDD may appear long and full of legal jargon, but it is packed with information that you can use to decide if the franchise is right for you. Some of the data includes information you can use to track the growth of the brand.  You even get contact information for current and former franchisees that you can use to obtain real first-hand experiences under the franchise system.

Franchisors are required to file the disclosure document with certain states in order to do business in those states. As a result, these disclosure documents are made available online.  You just need to know where to look. Of course, not all franchisors choose to do business in these states.  We can help, or you can try searching one of the following online databases:

Wisconsin: https://www.wdfi.org/apps/FranchiseEFiling/default.aspx

Indiana:  https://securities.sos.in.gov/public-portfolio-search

Minnesota: https://www.cards.commerce.state.mn.us/CARDS

California: https://docqnet.dfpi.ca.gov/search

Yes.  One of the required disclosures is a list of current and recently terminated franchisees. These are found in Item 20 and are often included in an attachment. They may or may not talk to you, but you are free to contact them. Keep in mind, you will go on this list if you purchase a franchised business.  

We are Virginia licensed attorneys working in a Virginia franchise law firm; however, that does not mean we can only advocate for Virginia franchisees. Attorneys are permitted to work in their state while serving business interests across the country. If litigation is involved, we are Virginia litigation attorneys and can work with local counsel in other states as needed. Experience in franchising is far more important than the physical location when it comes to providing franchise legal support to prospective franchisees.

The franchise agreement is the contract that binds the franchisee and franchisor during (and after) the term of the relationship.